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Indiana Becomes Latest State to Tax Student Loan Forgiveness

Indiana Becomes Latest State to Tax Student Loan Forgiveness

Indiana has become the latest state to confirm that residents will have to pay taxes on forgiven student loans. 

According to the official White House fact sheet for President Biden's plan, the proposal will eradicate $10,000 in student loan debt for those who do not have Pell Grants and make under $250,000 per year for couples filing jointly and $125,000 per year for others. Those who meet the income requirements and did receive federal Pell Grants stand to have $20,000 in debt forgiven.

When the news broke, many American taxpayers immediately wondered if their tax bills would be impacted by the student loan forgiveness plan. CNBC weighed in on the tax question, clarifying that "student loan forgiveness won't trigger a federal tax bill."

However, this does not necessarily hold true on a state-by-state basis. Now -- joining other states like Mississippi -- Indiana has confirmed that forgiven loans will still be subject to taxation. 

The Associated Press reported:

Indiana’s tax rate is 3.23%, meaning those who are eligible to receive $10,000 in federal loan forgiveness will pay up to $323 in taxes, while Pell Grant recipients could owe around $646, Natalie Rodriguez, communications manager for the [Indiana] Department of Revenue, told the Associated Press on Tuesday via email.

Indiana Speaker of the House Todd Huston (R) shared with AP that he expects conversations about the state's taxation policy "to continue as we head into the next legislative session," which is set to start in Indianapolis in January.

Some states, including New York, Pennsylvania, Kentucky, Virginia, Hawaii, and Idaho, have already confirmed that forgiven student loan debt will be exempt from taxation, per a recent Bloomberg report.

What do you think about the Hoosier State joining the ranks of the states taxing forgiven student loans?

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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